Businesses have tax benefits
Robert Kiyosaki did a great job detailing how much of an employee’s income is given to the government, versus how much a business pays in taxes. My favorite diagram from Kiyosaki was the difference between an employee’s and a business’ cash flow:
Employee’s Cash Flow:
Earn – Tax – Spend
Business’ Cash Flow:
Earn – Spend – Pay Tax on whatever is left over
Even if you are just a small, home based business, there are a ton of tax benefits to working for yourself. A lot of people will nay-say, and explain that a self-employed individual pays 33% of their income to taxes. This is true. However, self-employed people and businesses pay 33% on their income AFTER they pay all of their expenses, instead of an employee who pays 25% to 50% of their money before they get a dime!
Self-employed people and businesses keep 100% of their money when they get paid. If I charge $500 for a website, I get a check for $500 when I’m finished. Then, I get tax-deductions for my mileage, for buying a computer to do my work, for taking the client out to eat, for the phone I used to speak with them, and for the internet connection I used to do the work. Personally, I do not take a home office deduction, but that is another option. Finally, whatever income I cannot deduct away, the IRS will tax me 33% on. I’m fine with that!
You might actually make money doing something you enjoy!
This is the largest draw for myself personally, and is probably the biggest benefit to most self-employed and business owning individuals. Web Design is my passion. It’s something I love. Speaking with people, getting them setup on the internet, and helping small businesses is something I love doing, and I get paid to do it!
Whatever your passion is, more than likely you can make money at it. You like painting snail shells, put some of them on eBay or Etsy.com and get started today!
Doing something new, and maybe a little scary, is good for you!
Timothy Ferriss (my god second only to The God) first introduced me to the idea of opportunity cost. While it may look like not starting a business shelters you from any risk, you face the biggest risk of all. The risk you face is missing what could be the greatest opportunity of your life.
A simple analogy for everyone. A creek divides a wood you’re walking through. You are terrified of water. On the other side of the divide are the most delicious apples waiting to be plucked from their tree. Not crossing that steam because of fear looks like it’s not costing you anything. The real truth, is that it’s costing you a very tasty and refreshing snack.
How much larger is the chance of working for yourself, being financially independent, following the beat of your own drummer, and any other cliche I can use for owning your own business? Fear is fine. Everyone has it. Letting that fear hold you back from the opportunity of a lifetime is irrational.
You’ll be in great company
My whole life I’ve known and been around business owners. They are the most wonderful group of people imaginable. Sure, there are some bad apples, but they get cut out pretty fast in the small business culture. No group of people are so quick to help another person get started, and no one else is as fast to encourage others as business owners. Everyone knows it can be difficult. Most have walked the road more than once. That experience makes them different, wonderful people. Join the group!
You might fail
Fear holds more people back everyday than any debilitating disease in the world. As far as I’m concerned, FEAR is the most widespread and infections killer of humans today. Timothy Ferriss explains a great exercise to put yourself through that is certain to squash your fears.
Picture the worst possible scenario starting your own business could cause.
You start working on the side, turning a hobby into a small business. This goes on for about a month. You have little to no sales. Your boss finds out you’ve been doing something to make money outside of work. He is furious and fires you. You’re business isn’t making enough money, you have no job, and your spouse’s income is not enough. You look for other jobs, no one will hire you since you’re tainted goods. Soon all the utilities are shut off, the bank has foreclosed on your house, you and your family are now living in a homeless shelter living off food stamps.
If this actually scared you, stop reading and leave now…
If you realize the likelihood of your worst fears coming to fruition is tiny compared to the possible benefits of a future working for yourself then carry on!
If not now, when?
What is the benefit of waiting? I’ve been told I’m impatient and I need to change that aspect of my personality. My response, “Being impatient has helped me a lot more often that it’s hurt me.”
Tomorrow will never come for you. Put the wheels into motion today! Paint another snail shell, take a picture of it and put it on the internet for sale. Who knows, someone might actually buy it. If not, you’re out no money, and you can continue to enjoy painting snail shells.